Deansgate 123 LLP v Workman & Anor

Whether later proceedings are an abuse of process is a broad, merits-based judgment. The fact that a claim could have been brought earlier is not conclusive. The court must ask separately whether it could and should have been brought earlier, considering all relevant public and private interests. The burden lies on the party alleging abuse.

Where a challenge to the validity of a transfer and an application under Insolvency Act 1986, section 423, concern related facts, they may be heard together, but they remain legally distinct and need not necessarily be combined. A party’s openness about its intended later claim, and compliance with appropriate case-management guidance, are important factors. A later section 423 claim was therefore not abusive where the earlier proceedings determined only the transfer’s validity and the claimant had made its intended claim clear.

Ian Workman senior executed a transfer form purporting to transfer properties to his son. Mrs Forrester, as executrix of the deceased former wife’s estate, and Deansgate 123 LLP each later brought claims under section 423 of the Insolvency Act 1986, alleging that the transfer was intended to put assets beyond the reach of creditors.

Before those claims were issued or served, the court determined an application by Ian Workman junior concerning the validity and effect of the transfer. The court held that the transfer was effective and stated that any section 423 claim should be dealt with separately. The defendants then applied to strike out both claims as an abuse of process. The central issue was whether the later claims could and should have been raised in the earlier proceedings.

1. Applications dismissed. Neither the Forrester claim nor the Deansgate claim was an abuse of process.
2. The court applied the principles stated in Johnson v Gore Wood & Co [2002] 2 AC 1. The burden was on the party alleging abuse. The court had to make a broad, merits-based assessment of all the circumstances. The questions whether the claim could have been raised earlier and whether it should have been raised earlier were distinct. The fact that a claim could have been brought earlier was not conclusive.
3. An application under section 423 of the Insolvency Act 1986 concerns the purpose and effect of an effective transfer. Those questions are logically and legally distinct from whether the transfer was valid or effective, even though the evidence may overlap. The two matters can be heard together, but the authorities did not establish that they must be.
4. The guidance in Aldi Stores Ltd v WSP Group Ltd [2007] EWCA Civ 1260 required parties in appropriate multi-party litigation to put prospective claims before the court so that effective case-management directions could be considered. Openness was an important factor in the abuse assessment. The present proceedings were not the complex commercial multi-party litigation principally contemplated by that guidance, but both claimants had made their intended section 423 claims sufficiently clear.
5. Mrs Forrester had expressly indicated before the earlier hearing that she would seek section 423 relief if the transfer were held valid. She had also sought an adjournment so that the issues could be heard together, but that application had been refused. She was therefore following the course the court had directed, and her later claim did not relitigate the validity issue.
6. Deansgate’s decision to stand back from the validity dispute while reserving its section 423 claim was legitimate. It accepted the transfer’s validity and did not seek to challenge the earlier declarations. Its late but detailed explanation of its position meant that the defendants were not misled or taken by surprise.
7. The court rejected the submission that section 423 was a form of punishment of wrongdoers. The relevant public interests were access to justice, finality of litigation, and preventing abuse of the court’s processes.

First instance decision. No prior appellate decision is stated in the judgment.